Revealed Price Preference: theory and empirical analysis

Professor of Economics, John Hopkins University. Co-editor, Journal of Mathematical Economics.

Please see Prof. Quah's CV for more information.

We develop a model of demand where consumers trade-off the utility of con-sumption against the disutility of expenditure. This model is appropriate whenever a con-sumer's demand over a strict subset of all available goods is being analyzed. Data sets consistent with this model are characterized by the absence of revealed preference cycles over prices. For the random utility extension of the model, we devise nonparametric statistical procedures for testing and welfare comparisons. The latter requires the development of novel tests of linear hypotheses for partially identified parameters. Our applications on national household expenditure data provide support for the model and yield informative bounds concerning welfare rankings across different prices.